Steel Cost Increases Continue

© 2008 Door & Access Systems
Publish Date: Summer 2008
Author: Earl Rivard
Page 54

Steel Cost Increases Continue
By Earl Rivard, Vice President of Marketing, 1st United Door Technologies

Steel costs continue to escalate at a rapid and substantial pace. Costs for some types of steel have increased by more than 50 percent since Jan. 1, 2008. It’s never easy to pass on or absorb an increase, but it’s even more difficult in a troublesome economy.

Escalating material costs stem from global issues of cost, supply, and demand. Unfortunately, these enormous cost increases are passed on to U.S. companies in the form of surcharges or price increases.

Door Component Increases

Here’s a glance at some typical garage-door-related cost increases experienced since Jan. 1, 2008.

• Prepainted Steel Coils: Up 45-55%
• Struts: Up 30-40%
• Track Sets: Up 25-35%
• Hardware Cartons: Up 20-30%
• Torsion Tube: Up 25-35%
• Springs, Coned and Painted: Up 25-30%
• Other Steel Components: Up 20-25%

A Global Issue

During the last six months, the global steel market has experienced large cost increases for iron ore, coke, energy, transportation, and scrap. These input costs are expected to continue to rise.

The impact of increasing costs is compounded by increasing demand for steel in Asia and other emerging countries. The BRIC (Brazil, Russia, India, and China) countries will consume much more of the world’s steel supply than they have in past years.

Economic growth in each of these countries is estimated to be about 10 percent while the U.S. growth projection is estimated to be less than 1 percent. Our country produces and consumes less than 9 percent of the world’s steel.

Raw Material Increases

Take a look at some recent cost increases faced by steel mills (as of April 2008):

• Scrap: Up 92%
• Iron Ore: Up 150%
• Coking Coal: Up 160%
• Energy Costs: Up 25%

The weak U.S. currency has led to fewer steel imports being available. Foreign mills are selling their steel to other countries where they can get a more favorable currency exchange rate. At the same time, domestic mills are exporting steel to other countries that need more steel and want to take advantage of the weak U.S. dollar.

Aftershocks of the China Earthquake

Manufacturers are cautious. Anything can happen to put pressure back on an already tight supply market. The May 12 earthquake in China is a good example.

The earthquake disrupted steel production and logistics in several areas and brought two major steel-making operations to a halt. As reconstruction begins, steel market prices could go up again because of the surge in demand.

The Bottom Line

The bottom line is that garage door manufacturers, their suppliers, and their dealers don’t have much choice but to absorb these increases. Builders, architects, and homeowners need to understand the dynamics of the situation, as they will ultimately bear the impact of these cost increases.

Given the instability of raw material costs, the value of the dollar, and the availability of domestic steel, no short-term relief to these cost increases seems likely. Stay tuned.